What do changes to IHT mean for your clients?

The rules around Inheritance Tax (IHT) have not stood still. The Autumn Budget 2024 started the shift, then the Autumn Budget 2025 and a December 2025 update refined them. Together, these changes reinforce the need to talk to clients about their potential IHT exposure.

Changes in the 2024 Budget

The first Budget from Chancellor Rachel Reeves announced some key changes to IHT:

Nil-rate bands frozen to 5 April 2030. The IHT nil-rate band stays at £325,000 and the residence nil-rate band at £175,000. The residence nil-rate band taper continues to start at £2 million.

From 6 April 2026: updated Business Relief allowance. 100% relief would apply to the first £1m of qualifying unquoted (privately owned) business and agricultural assets per person; above that, relief would be 50% (equivalent to an IHT rate of 20% on the excess).

AIM shares: 50% relief. From April 2026, any shares in qualifying companies listed on the Alternative Investment Market (AIM) will be eligible for Business Relief at a reduced rate of 50% in all circumstances, an effective IHT rate of 20%.

From 6 April 2027: most unspent pensions included in estates. Unused pension funds and some pension death benefits will generally fall within the estate for IHT purposes.

Budget 2025: further updates

The Autumn 2025 Budget announced two further changes. Firstly, that the freeze on the nil-rate band and residence nil-rate band would be extended to 2031. Before the announcement, the Office for Budget Responsibility had already expected IHT receipts to increase from an estimated £9.1 billion in 2025-26 to £14.3 billion by 2029/30 [1]. That number is likely to go even higher by 2031.

Secondly, from April 2026 the £1 million allowance for the 100% rate of Business Relief would be transferable between spouses and civil partners. This ‘spousal exemption’ brings the rules around Business Relief in line with the rules for transferring the nil-rate band and residential nil-rate band allowances to the surviving partner.

An increase in the Business Relief allowance

Just before Christmas, the government announced that the £1 million allowance for 100% Business Relief and Agricultural Relief would in fact be increased to £2.5 million from April 2026, with 50% relief continuing to apply to assets above that level. Taken alongside the earlier decision to make the reliefs transferable, this means that from April 2026 up to £5 million in qualifying assets can be passed on between them at the full 100% rate of relief.

Unspent pensions to be brought into estates

The change to unspent pension pots is hugely significant when it comes to estate planning. Many clients have opted to preserve their pension for as long as possible in retirement, as they had expected their pension pot could be inherited completely IHT-free.

While many advisers are understandably waiting for more certainty before acting, they don’t need to wait to start the conversation with their clients. The priority now is to identify which clients might be exposed and what needs to happen so that they are ready to move when the rules take effect.

How do the changes impact the Triple Point Estate Planning Service?

The Triple Point Estate Planning Service invests only in private, unquoted companies and does not invest in AIM-listed businesses. When the new Business Relief limits take effect in April, investors with less than £2.5 million in qualifying assets will see no change in terms of IHT relief that can be claimed by their estate. For amounts above £2.5 million, relief will be 50%.

Investors should note that the £2.5 million allowance applies to all their qualifying assets, not just those held in the Triple Point Estate Planning Service. If their total qualifying investments exceed £2.5 million, only the first £2.5 million will receive 100% relief. For couples, transferability may increase the combined allowance to £5 million, subject to the usual rules.

The increasing importance of Business Relief?

More estates are likely to face IHT in the coming years, yet most Business Relief claims already sit well within the new £2.5 million allowance. Recently published HMRC data shows that in the 2021/22 tax year, 96% of estates claimed £2.5 million or less, and the median qualifying value of assets qualifying for Business Relief was £200,000.

This suggests that Business Relief will be an increasingly important part of discussions with clients about estate planning, and the role that it could play in passing on their legacy.

For clients, the message is simple: IHT planning is changing shape. Advisers who start discussions now will put clients in the best possible position for when the rule changes take effect. To apply this across your client bank, connect with us for a short planning session.

Important information

The Triple Point Estate Planning Service places capital at risk and there is no guarantee that the target return will be achieved. Past performance and forecasts are not a reliable indicator of future performance. Investing in unquoted shares, may carry higher risks than investments in quoted shares, such as it being difficult to sell your investment. Tax relief depends on the companies we invest in maintaining their qualifying status. Tax treatment depends on the individual circumstances of the investor and is subject to change.

[1] Source: IFA Magazine